Mottolese v. Kaufman

176 F.2d 301, 1949 U.S. App. LEXIS 3045
Court of Appeals for the Second Circuit·Decided July 6, 1949·No. 21334·Published·Cited by 106 cases

Opinions

L. HAND, Chief Judge.

This is a petition for mandamus to direct the respondent, Judge Kaufman, to proceed in due course with the hearing and trial of an action in the District Court for the Southern District of New York, between Mottolese, the petitioner, as plaintiff, and Harry Preston and others, as defendants. The petitioner sought by appeal to review the same order which this petition brings up; and although we dismissed the appeal last January,1 we suggested that mandamus might be an appropriate remedy. The petitioner has followed that suggestion without, however, renewing her motion before Judge Kaufman. The action is a shareholders’ derivative suit brought in the interest of the San-Nap-Pak Company, Inc., a New York corporation, against its directors, past and present, and a number of corporations alleged to have been concerned in the wrongs in question, which consisted of depredations upon the corporate treasury. It was commenced on July 7, 1948, at which time there was already pending in the state court an action, consolidated out of nine separate actions, all upon the same claims and against substantially the ■same defendants, but brought by separate shareholders. The first of these nine actions had been begun on June 30, 1947, and the other eight had followed before November 28 of that year, the date of the consolidation order. The attorneys for the plaintiff in the present action were the attorneys for the plaintiffs in a majority of the nine actions, and the state court made them attorneys in the consolidated action. On July 21, 1947, another shareholder, Turner — also represented by ¡these attorneys — commenced an action in the District [302] ■Court of the Southern' District of New York and on January 28, 1948, the same plaintiff commenced a second action, and these two have also been consolidated. Turner withdrew, and the complaints in the two Turner .actions were ordered dismissed; but before any order had been entered, one, Martini, was allowed to intervene on November 8, 1948, and the action is still pending. A motion for a stay in this consolidated Turner action on the same grounds as that made in the case at har is now pending undetermined before.Judge Bondy, awaiting the outcome’ of this motion. Judge Kaufman, by -an order entered November 22, 1948, stayed any further proceedings in the action at bar pending the determination of the consolidated action in the state court “without prejudice, however, to the right of the plaintiff to ■apply to vacate or modify the stay in event of any 'change in circumstances in, or affecting the actiori entitled W’aterman Corporation et al. v. James J.-Johnston et ah * * * which' would make it inequitable to continue the stay.” Before this order was entered the plaintiff had given notice of the taking of the depositions of three of the corporate defendants, which they had moved to -vacate; and the order now before us directed that any -further proceedings to take -the -depositions should- be held in -abeyance.

There can be no question that we have jurisdiction to proceed by mandamus, and, if the stay of the action was wrong, the writ -should go,2 for the issues that will be -decided in the -Consolidated Action will be almost certain to dispose of the -case at bar. The real plaintiff in interest there and here is not the shareholder, but, as in all shareholders’ derivative suits, the San-Nap-Pak Company; and a judgment in the state action, if indeed not -an absolute bar in this action, would at least be -an estoppel as to th-e controlling issues. Therefore, although the district court — and we upon appeal — would not formally lose jurisdiction over the case, -it would come to us already -decided in substance. Only by a -present -review of the order can that consequence be avoided; and the writ is necessary to our appellate- jurisdiction, which otherwise may be'-defeated.

It is probably true that -originally the statutory privilege of access to a federal court was regarded as absolute and indefeasible, no matter whether -its exercise resulted in inconvenience, delay and expense to the defendant.3 There -can be no doubt, however, that thi-s is no longer true. One of' the many exceptions is when a critical issue in the federal action is the proper construction of a -state constitution, or statute.4 Other exceptions are when the federal action involves interference in the internal affairs of a -corporation;5 -or when there is an adequate local administrative procedure -provided by the state;6 or when a federal action for a declaratory judgment is brought, “where another suit is pending in a state court -presenting the same issues.”7 These are all instances of a discretionary power to stay the federal action, because a proper -regard for the autonomy of the states makes that course desirable. However, the Ninth -Circuit in Butler v. Judge -of the United States District Court,8 -as we read its -opinion, sustained a stay of the -federal action, merely because the same issues were involved ih an earlier action in the state court between the same parties; and the First -Circuit in In Re President & Fellows of Harvard [303] College9 proceeded upon the assumption that that power existed, although it thought that the discretion of the district court had been abused, principally, if not altogether, because the federal action came first. In Brendle v. Smith10 Judge Rifkind stayed a shareholder’s derivative suit in a situation similar to that at bar.

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Mottolese v. Kaufman, 176 F.2d 301, 1949 U.S. App. LEXIS 3045 (2d Cir. 1949).

176 F.2d 301 (Mottolese v. Kaufman) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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